Privacy Law Blog : Privacy Lawyers & Attorneys : Proskauer Rose Law Firm : CAN-SPAM, FCRA, FACTA

Unlike prior settlements in response to data security breaches where the FTC required the implementation of a comprehensive information security program as a remedial measure, the Buzz settlement requires Google to enact a comprehensive privacy program, consistent with the Commission’s “privacy by design” approach that we have previously blogged about.  Specifically, the FTC’s proposed settlement requires Google to establish and maintain “a comprehensive privacy program” to “address privacy risks related to the development and management of new and existing products and services for consumers” and “protect the privacy and confidentiality of covered information.” 

The settlement also requires Google to “clearly and prominently disclose” if a user’s information will be disclosed to third parties, the identity or specific categories of such third parties, and the purposes for sharing; and to obtain affirmative consent from the user regarding the sharing.  In addition, the settlement requires Google to provide a report on the effectiveness of the company’s privacy program biennially to the FTC for the next twenty years.

The FTC’s Complaint that underlies the settlement alleges that Google launched the Buzz social networking service in February 2009 within its Gmail product.  Upon logging into their Gmail accounts, users were presented with the option to “Check out Buzz” or proceed to their Gmail inbox.  The FTC alleged that even if a user opted to go to his or her inbox, that user’s information was still shared with others in the Buzz network.  The FTC claimed that Google therefore did not use the information that users provided to Google only for the purpose of providing them the company’s web-based email service (Gmail) – rather, Google also used this information in connection with the Buzz social networking service.  Moreover, Google did not request users’ consent before using the information collected from Gmail users in connection with Buzz. 

The FTC further alleged that if a user clicked a link to “Turn off Buzz” certain information about that user was still shared with others.  Moreover, the FTC alleged that Buzz did not adequately communicate that certain previously-private information would be shared by default and certain personal information was shared without users’ permission.  The FTC also claimed that the “Turn off Buzz” and options to go to the user’s inbox without signing into Buzz were false or misleading because they represented that a user either would not be enrolled in, or would be removed from, Buzz, when in fact a user was enrolled and not removed from the service consistent with these representations.

The FTC also alleged that Google failed to disclose how a user’s information would be shared.  These allegations also amounted to a substantive violation of the US-EU Safe Harbor Framework, according to the FTC—particularly, the Notice and Choice and limited purpose principles.

These practices also violated Google’s own privacy policy in effect at the time Google Buzz was launched, according to the FTC.  In pertinent part, the policy stated that “Gmail stores, processes and maintains your messages, contact lists and other data related to your account in order to provide the service to you” and “[w]hen you sign up for a particular service that requires registration, we ask you to provide personal information. If we use this information in a manner different than the purpose for which it was collected, then we will ask for your consent prior to such use.” (Emphasis added.)

In settling the FTC’s charges, Google did not admit the truth of any of the FTC’s substantive allegations.

This settlement demonstrates the importance of having a comprehensive privacy program in place that ensures that privacy protections are incorporated into web applications from the ground up.  The settlement’s requirement that Google enact a comprehensive privacy program demonstrates that the FTC is serious about privacy and foreshadows potential future settlement terms.  The settlement also reaffirms the importance of compliance with the US-EU Safe Harbor framework for companies that have opted into this program.

In the FTC’s action against TJX, the Commission alleged that TJX failed to prevent unauthorized access to personal information on its computer networks. These failures allowed a hacker to exploit vulnerabilities and obtain tens of millions of credit and debit payment cards used at the retailer’s stores along with personal information about approximately 455,000 consumers that returned merchandise without receipts. The FTC alleged that TJX:

• Created an unnecessary risk to personal information by storing it on and transmitting it between various computer networks in clear text;
• Did not use readily available security measures to limit wireless access to its networks, thereby allowing an intruder to connect wirelessly to its networks without authorization;
• Did not require the use of strong passwords or different passwords to access different programs, computers, and networks;
• Failed to use readily available security measures, such as firewalls, to limit access among its computers and the Internet; and
• Failed to employ sufficient measures to detect and prevent unauthorized access to computer networks or to conduct security investigations, such as patching or updating anti-virus software. 

The FTC’s settlement with TJX requires the retailer to implement and maintain a comprehensive information security program that is designed to protect the security, confidentiality and integrity of personal information collected from or about consumers. The program must include certain administrative, technical and physical safeguards that are appropriate to the company’s size, the nature of its activities, and the sensitivity of the personal information it collects. In particular, TJX must:

• Designate an employee or employees to coordinate the information security program;
• Identify internal and external risks to the security and confidentiality of personal information and assess the safeguards already in place;
• Design and implement safeguards to control the risks identified in the risk assessment and monitor their effectiveness;
• Develop reasonable steps to select and oversee service providers that handle the personal information they receive from the companies; and
• Evaluate and adjust their information security programs to reflect the results of monitoring, any material changes to their operations, or other circumstances that may impact the effectiveness of their security programs.

In addition, TJX must retain an independent, third party security auditor to assess the sufficiency of its information security program at least once every two years for the next 20 years. This security auditor will be required to certify that the company’s security program satisfies the requirements of the consent agreement and is operating with sufficient effectiveness to provide reasonable assurance that consumers’ personal information is being protected. The FTC is not seeking any financial penalty to resolve the charges.

The proposed agreement is subject to public comment until April 28, 2008, after which the FTC will decide whether to make it final.

The complaint identified five specific security failures:

• failure to adequately assess risks to the information stored on the network and in paper files,
• failure to adequately restrict access to personal information to authorized employees only,
• failure to implement a comprehensive information security program,
• failure to provide adequate training about handling and protecting personal information and responding to security incidents, and
• failure to require third-party service providers by contract to protect the security and confidentiality of personal information.

The FTC Complaint charged Goal Financial with violating the FTC Act by disseminating a false or misleading privacy policy that claimed to "implement[] reasonable and appropriate measures to protect personal information from unauthorized access." Because Goal Financial qualifies as a "financial institution" under the Gramm-Leach-Bliley Act, the Complaint also alleged violations of the GLBA Safeguards Rule and the GLBA Privacy Rule. The Safeguards Rule allegation reflected the company's failure to identify privacy risks and design appropriate safeguards, while the Privacy Rule charge stemmed from the company's privacy policy and notices inaccurately representing the actual security of consumer information.

The public comment period on the proposed consent order runs until April 3, after which the FTC will decide whether to finalize the order.